Remedies for testing times
By Robin Stride
Independent practitioners are being given wide-ranging advice to help secure their business futures from the ravages of Covid-19.
Hundreds of doctors with private practices committed themselves totally to patients in the NHS and others made way as their independent hospitals helped the state at cost price.
Specialists laid off secretaries, while others were hit by staff absences caused by transport problems and partners self-isolating or staying home to child-mind.
Many sought financial help and here are some key issues and experts’ tips:
Doctors were advised to seek a defence cover reduction for the lower level of work anticipated for the upcoming year or they might otherwise pay too much (see ‘Cut indemnity cover costs if income drops’).
James Gransby, of RSM UK Tax and Accounting Ltd, added that those operating through a limited company and with built-up cash through retaining profits could find that now was the time to deplete reserves to pay personal living costs.
James Gransby
‘The main ways will be via dividend, taking a loan from the company or depleting money you have previously loaned the company. Taking a salary is also possible, but would incur more tax.
‘When extracting profits as dividends, then dividend tax of up to 38.1% will be payable personally, so don’t overlook this and keep some money aside for when this becomes payable.
‘You can borrow money from your company by way of a loan without having to declare dividends. This must be repaid within nine months of the company year-end to avoid a tax charge.
‘So operating with a 31 March year-end then taking it on or after 1 April 2020 will mean it does not need to be paid back until 31 December 2021.’
Mr Gransby, a spokesman for the Association of Independent Specialist Medical Accountants, said enough should be retained to pay any corporation tax due.
‘If you have a company filing deadline approaching soon, Companies House has given flexibility over submission deadlines, so keep checking its website for the latest news on this. Presently, they are offering a two-month extension to the normal filing date.
‘You need to ask for the extension before your normal filing date, it is not giving this automatically.’
Mortgage payments
Paul Gordon, medical specialist financial planner at MacArthur Gordon, said consultants and GPs were worried about meeting existing expenditure, but cutbacks were possible.
They were taking a mortgage payment holiday of up to three months, the limit as we went to press, without impacting their credit score. This applied to both residential, buy-to-let and loans.
Mortgage payments after expiry of the three months would be adjusted upwards to take the unpaid amount into account.
The process was ‘relatively straightforward’ with lenders accepting instruction by phone, with some allowing email to avoid being on hold.
The Government is protecting 80% of an employee’s salary up to £2,500 monthly to avoid them being made redundant. Payments are expected this month, backdated to March if staff are re-employed and granted a leave of absence.
Mr Gordon added: ‘The July income tax payment can now be deferred until January 2021, which is certainly welcome and, better still, no action is required, although I suggest contacting accountants to confirm the position and prepare for the increased January payment.
‘But note that those impacted by the pension annual allowance and looking to use Scheme Pays for 2018-19, the deadline remains 31 July 2020.
‘Mortgages can be switched to an offset facility, using funds reserved for tax liabilities/savings to reduce the interest payment. These funds can be accessed when required to supplement income and cover expenditure.’
‘Don’t forget to plan for the worst’
Mr Gordon said it was important for doctors to nominate beneficiaries for benefits from their NHS Pension Scheme if they were to die, with benefits paid to the spouses or civil partners survivors. For all others, the nomination of beneficiaries was easy and accessed on the NHS Business Service Authority website.
Insurances should be reviewed for protection of income during ill-health, mortgages in case of death or critical illness, and commitments such as childcare and education costs in the event of death.
Mr Gordon said: ‘This is particularly relevant for those who have opted to cease contributions to their NHS pension as a result of the annual/lifetime allowance and have seen both death and ill-health benefits reduced.’
Doctors are also advised to ensure their billing is timely while they are under such pressure. Some groups were owed over £250,000, even before the virus.